Chordiant Software, Inc. F1Q09 (Qtr End 12/31/08) Earnings Call Transcript

| About: Chordiant Software (CHRD)

Chordiant Software, Inc. (CHRD) F1Q09 Earnings Call Transcript January 29, 2009 5:00 PM ET


Peter Norman - CFO

Steve Springsteel - Chairman, President and CEO



Ladies and gentlemen, please continue to standby, Chordiant Software’s first quarter 2009 earnings conference call will begin momentarily. Thank you for your patience and please do not disconnect, your conference will begin momentarily.

Ladies and gentlemen, thank you for standing by. Welcome to Chordiant Software’s first quarter 2009 earnings conference call. During today’s presentation, all parties will be in a listen only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions). This conference is being recorded today, Thursday, January 29th of 2009.

I would now like to turn the conference over to Pete Norman, Chordiant’s Chief Financial Officer. Please go ahead sir.

Peter Norman

Good afternoon. I am Pete Norman, Vice President and Chief Financial Officer of Chordiant Software. Thank you for joining us today to review our results for the first quarter of fiscal 2009. On the call with me today is Steve Springsteel, our Chairman, President, and CEO.

We will begin with prepared comments from management, and then we will open the call up for questions. By now, you should have a copy of the press release issued by the Company this afternoon after the close of the market. You can find a copy of this release on our website at A replay of this conference call can also be reached through the Investor Relations section of the Company’s website.

The information in today’s conference call will include historical information and forward-looking statements, including guidance about our business that involves risks and uncertainties that could cause actual results to differ materially from those contemplated by forward-looking statements.

Forward-looking statements are generally identified by words such as believe, may, expect, plan, guidance, projections, and similar expressions. Further information on potential factors that could affect our financial results is included in Chordiant’s most recent SEC filings. We assume no obligation to update guidance or other forward-looking statements.

In addition, non-GAAP financial measures and the most directly comparable Generally Accepted Accounting Principles or GAAP financial measures may be discussed on this webcast. Chordiant continues to provide all information in accordance with GAAP and does not suggest or believe that non-GAAP financial measures should be considered as the substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

Chordiant believes that these non-GAAP financial measures provide meaningful supplemental information regarding its operations, primarily because they exclude amounts such as the expense for non-cash equity based compensation, restructuring in a frequent charges to non-cash tax expense through awaited to net operating loss carry forward and the amortization of purchase intangible assets.

The Company does not considered these items a part of ongoing operating results when assessing the performance of certain functions, geographies or members of management. We believe that our non-GAAP financial measures also facilitate the comparison results for current period with the results for past periods. Please visit the Investor Relations section of our website for more information regarding the non-GAAP financial measures discussed on this webcast.

And now, I will turn the call over to our Chairman, President and CEO, Steve Springsteel. Steve?

Steve Springsteel

Thanks, Pete. Good afternoon, everyone and thank you for joining us today.

First, I will briefly discuss our results for the first quarter of fiscal 2009. Then I would like to discuss our view of the current market condition and how Chordiant is continuing to position itself for this challenging environment. Finally, Pete will discuss the first quarter financial results in more detail, as well as our outlook for fiscal 2009. We will then open the call up for questions.

Revenue for the first quarter was $23.4 million, slightly below our internal projection due to lower than anticipated services revenue which resulted from both the adverse impact of foreign exchange rates and the slowdown of some customer implementation projects.

However, Chordiant posted its eight consecutive quarter of profitability as non-GAAP net income for the quarter was $647,000 or $0.02 per fully diluted share. GAAP net loss for the quarter was $2.7 million or $0.09 per fully diluted share. The GAAP net loss resulted in large part from the nearly $900,000 restructuring charge, we took due to our October reduction in force and to a $1.3 million deferred tax expense which Pete will discuss later.

On a gross basis, our bookings were up by more to $2 million from the prior quarter. However, during the quarter we have an unusual situation in which we adjusted approximately $3 million of professional services orders that had expired at the end of the calendar year. Pete will provide the detail later on this call. After this adjustment, our net bookings for the quarter were approximately $14 million.

During the quarter we closed one new license transaction in excess of $1 million with an existing customer in the telecommunications vertical and two maintenance renewals over $1 million each. Although, not included in the bookings for the quarter we closed two orders on the Vodafone contract each in excess of $1 million.

Major customer wins during the quarter included one in UK, Deutsche Bank, DMW Finance, and GM China. These wins demonstrate our continued ability to sell into the financial services and telecommunications verticals despite the challenging environment. At the end of December, deferred revenue was approximately $43 million and backlog was approximately $56 million.

During the quarter, we produced positive cash flow from operations and our ending cash balance was approximately $54 million. On a currency basis our cash would have increased approximately $3 million during the quarter, primarily due to strong cash collection.

Now, I would like to turn that we are over seeing in the marketplace. At a highlight level we have nothing much change this last quarter end. The software spending environment continues to be very challenging and IT budget continued to be inflicts as our customers evaluate this situation.

One consistent that we are hearing from customers as a requirement for our products to demonstrate is quick time to ROI. As I said 90 days ago we first see a very challenging environment for enterprise technology spending in fiscal 2009 but we cannot predict when the overall market and software selling environment will improve, Chordiant continues to focus on those things which are within our control - our products, our strategies, managing our business with the goal of continue profitability and preserving our healthy balance sheet.

We continue to invest a world class product to insure that Chordiant maintains its competitive advantage. A large blue-chip installed customer base is one of our most important assets and we are focused on insuring that our products continue to evolve to meet and exceed our customer needs.

We believe that our installed base is a competitive advantage for Chordiant especially in tough times such as this. We will continue to manage through this downturn in the market and to invest at a prudent level to insure that our products remain cutting edge.

During this past quarter, we announced a number of key product point releases including enterprise case management, recommendation advisor, strategy director and collection. Additionally, last week we announced at Chordiant’s decision management, recommendation advisor, and enterprise foundation are now available for the IBM Web Application on DOS and dealing operating system.

In close collaboration with IBM, Chordiant is now running on this series that will provide our mutual customers and prospects with a great opportunity for delivering increased system consolidation. In the current of M&A we are desperate back office systems often cost many integration challenges together with an offer a very flexible options to deliver not only a single view of the client to the merged company, but more importantly we can deliver a single view of the merged companies to their client base. The fact that system Z allows applications to function like distributed application without having to actually consolidate back office systems brings tremendous value to many customers including reduced system integration class and faster time to ROI.

Our sales team is working very aggressively with IBM sales organization and a joint effort to generate new business. I am very excited about this new development and I am watching this situation very closely as is the head of IBM software division.

We continue to be focused on insuring that we have the financial resources to fund these technology investments and we fully expect to extend our product functionality and enhance our competitive advantage during this downturn.

At the same time we believe that some of our smaller, weaker and less capitalized competitors may even be forced to go out a business or will be unable to keep with that pace of innovation.

In our Company’s history, we have listed downturns before. We have learned from these experiences and as the results, we believe we are in a much stronger Company. We are focused on continuing our product excellence, maintaining our discipline operations and strengthening our overall competitive position.

As we discussed with you last quarter, we continue to see solid demand for application products. Although customers are paring back at overall IT budgets. They remained focused in the interest that in those products which have short payback period.

Our product portfolio contains application, such as recommendation advisor and collections’ manager, as well as our suite of marketing products which offer lower price points, quick ROI and shorter time to value. We believe there is a significant opportunity within our existing customer base for follow-on sales of these types of solutions and consequently we have seen demand for these products increased nicely over the last few quarters. This is evidenced by the fact of these opportunities now represent a major portion of our pipeline.

During the quarter we closed the seven-figure new license transaction with Orange UK. Orange is a key brand of the France Telecom Group providing mobile, broadband, fixed, business and entertainment services across Europe. It is one of the world’s leading telecommunications operators. Orange UK purchased additional licenses of our decision and recommendation advisor product which enable them to both increase customer attention and recognize substantial cost savings.

As a long standing customer utilizing Chordiant technology, Orange UK is founded by providing more relevant offer to the right customers at the right price still also able to realize a significant and an incremental profit.

Orange UK is purchased of additional licenses will be used across an increasing number of call center agents. Orange UK is also extending Chordiant solutions at their web channels.

Our relationship with Vodafone continues to grow. Their use of our technology continues to expand and their implementation will allow is ahead of schedule. There are number of important business problems that Chordiant helps these customers address. Spending environment such as this where we continue to hear from our customers such as Orange, [22.14], BMW, and Vodafone is that retaining customers and reducing churn is paramount.

In a quick time to ROI and reduction of cost is a requirement. Chordiant solutions are exceptionally well tailored to meet these challenges our customer face. On the private upfront, our partners continue to build solutions with us. We have made good progress in the creation of an even stronger alliances ecosystem around Chordiant. As an example, Cap Gemini has created the collections offering for the utilities market and is promoting their solution in the UK. This is promising as it is a new initiative with Cap Gemini it represents a new vertical micro for us that could have significant potential.

Time event has been a partner about one year now and then have zeroed in on the ability for Chordiant decision manager to add significant value to legacy CRM Solutions and have built adaptors to make this integration possible for our mutual customers and prospects. This is a large potential market and we believe we will see much more of this from our partner community but cognizant certainly of the first mover advantage.

Excentra continued their focus in growing their decisioning craft and now has 60 people with CBM experience mainly in support of Orange and Vodafone.

ECS and Chordiant are working together to pursue joint prospects in our respective customer basis specifically around solutions for factor upgrades of all diversion products and new opportunities for CBM products.

Overall, sales pipeline remained flat. We have done a thorough scrubbing to re-qualify and press the opportunities in our pipeline and well as decrease sequentially and remain fairly higher than it was 12 months ago.

Our emerging markets pipeline remained strong but we do not expect to see material near term revenue from this region. We expect that it will be a key component of our growth strategy going forward. We continue to work with our partners in this region to insure the Chordiant solution to get significant exposure but concerned that we are well positioned to capitalize and we believe will be a significant opportunity when these geographies begin to invest again.

I believe that our pipeline trends indicate the demand for our solutions continues to be solid. We just believe that the timing of transactions will be extremely difficult to predict over the coming quarters. Despite the tumultuous market conditions that we all face, we remained focused on ensuring the Chordiant successfully navigates through this macroeconomic downturn.

We will do this through disciplined operations while continuing to invest prudently in areas that we believe will feel growth as the market conditions improve. We also believe that our broad product set and large install base are key competitive differentiators for Chordiant. While our foundation platform products are important to us we are not fully dependent on them.

We continue to focus on innovation by investing and our product to insure that they remain best in class, and more importantly we will stick to our mantra as “make every customer successful and never let a customer fail.”

With that I will now turn the call over to Pete Norman, our Chief Financial Officer for a deeper dive into the first quarter financials and our guidance. Pete.

Peter Norman

Thanks, Steve.

Bookings for the first quarter of the fiscal year were $13.6 million included in this total was one new license transaction over a $1 million and two supporting maintenance renewals each over a $1 million. Although not included on the bookings for the quarter we received two orders placed under the commitment from Vodafone, each also in excess of a $1 million. Even in this challenging environment, we continue to close large transactions with existing customers which we believe is the testament to the strength of our products.

As Steve indicated revenues for the first quarter were $23.4 million, down from the $29.1 million we reported for the same period last year. Sequentially, revenues declined to $5 million or 18%. This sequential decline was primarily driven by a $2.5 million in lower hourly services and expense revenue and $1.6 million in lower license revenue. The change in hourly services was driven by a fewer number of available hours in the December quarter as a result of the holidays, the unfavorable foreign exchange variances and some customers slowing the pace of their project work.

As of December 31, 2008, backlog which includes the remaining Vodafone contractual commitment, our deferred revenue balances and committed statement to work for professional services was $55.6 million compared to the $70.1 million at the end of last quarter.

Looking at the $14.5 million declined in backlog for the quarter approximately $4.3 million of the change was caused by foreign exchange rate changes. In addition, there were 2 significant default components that resulted in a lower backlog of license revenue at the end of the quarter. The first being $4.2 million of Vodafone revenue that were recognized against their commitment and the second being the revenue taken on previously signed longer-term contract.

In the deferred serviced revenue there were also 2 significant components driving the change. The first being hourly work that was completed during the quarter and applied against existing statements of work and the second being the adjustment for $3.1 million as unutilized statements of work that expired during the period. This unusual item primarily relates to one of our customers that did not use all of the hourly resources as they have originally plan for on the project that was scoped in July of 2008.

This customer has since re-scoped their project and entered in to a new statement of work for future quarters. Our $13.6 million of recorded booking has been reduced by this $3.1 million and would advance $16.7 million without this adjustment. With respect to Vodafone, we received orders in the first quarter that exceeded the minimum commitment of our agreement. In the quarter $4.2 million of Vodafone license revenues were recognized, to date we have recognized $17.1 million of total revenues from the Vodafone contract using the December 31st euro to U.S. dollar exchange rate.

The remaining minimum contractual commitment under the Vodafone agreement combined with the existing deferred support amount would produce approximately $5.3 million of additional license revenues and $2.4 million of support revenues in fiscal 2009 and another $1.6 million of support revenues in fiscal 2010.

The 2010 support revenues will be higher if Vodafone elects to renew their support agreement. Amount recognized may also differ due to any future changes in the U.S. dollar to euro exchange rate. Our aggregate $43.1 deferred revenue balance at December 31, 2008 decreases approximately $3.2 million from the $46.3 million balance at the end of the prior quarter. Again, changes in foreign exchange rate have more than $1 million of this difference.

As of December 31, 2008 we continue to have four accounts with more than $1 million in the deferred license revenue. This revenue is expected to be recognized in future periods. Of the $43.1 million in total deferred revenue approximately $9.5 million or 22% of the balance relates to license fees and the majority of the remaining 78% is associated with support and maintenance contract.

As a reminder, there are also $6 million of future commitments from Vodafone that have yet to become due and payable. These amounts are in addition to the existing deferred revenue occurring on the balance sheet and are included in our backlog.

Turning to the income statement North American revenues represented approximately 35% of our total revenue with the remaining 65% being international.

License revenues for the first quarter of fiscal 2009 were $7.9 million or 34% of total revenue and included the $4.2 million of license revenues from the Vodafone orders price in Europe. Service revenues were approximately $15.5 million or 66% of total revenue. For the trailing 12 months period end of December 31, 2008, support and maintenance represented approximately 54% of the service revenue total. This maintenance revenues average approximately $9.9 million per quarter.

The slight decline from the $10.4 million average reported last quarter can be attributed to unfavorable foreign exchange rate changes. Our support and maintenance renewal experience was ahead of our internal expectation and continues to be excellent as their customer utilized their application for mission’s critical processes.

Over the past few quarters approximately 90% of the expiring contracts has been renewed while renewals measured on their dollar volume are actually higher, as a result during the quarter we had 7 renewals that each exceeded $400,000 with the largest 2 renewals each being in excess of $1 million. These renewals also indicate that our installed base remains committed to the use of our product.

With respect to margin, our overall first quarter non-GAAP gross margin including licenses and services were approximately 72% up 100 basis points from the prior quarter driven by a lower of hourly professional service component of the mix. Service margins continue to be strong for the first quarter non-GAAP service margins which includes support maintenance were 57.5% at the midpoint of our targeted range of 55% to 60%. Turning to operating expenses, the cost in all functional area were reduced by the reduction in work force that we completed in early October.

Our international expenses also benefited from foreign exchange rate changes. Sales and marketing expenses excluding stock base compensation for the December quarter were approximately $7.5 million down from the $8.6 million in the prior quarter primarily due to lower sales commissions and other head count related cost. We currently had 26 quarter carrying sales reps and alliance personnel as compared to 27 at the end of the fiscal 2008.

Research and development expenses excluding stock based compensation declined to $5.2 million for the quarter compared to $5.7 million last quarter. The primary reason for the decline was lower employee and consultant expenses. As discussed in the recent 8-K filing we also renegotiated discount on the fees paid to one of our offshore vendors. General and administrative expenses excluding stock based compensation was $3.9 million for the first quarter, essentially flat with the $4 million reported last quarter.

As we announced last quarter we implemented a reduction in force on October that resulted in a one time charge of $888,000. All cash payments related to the reduction were made before the end of the quarter. This charge was slightly offset by a $104, 000 favorable adjustments to a prior year accrual relating to the closure of our office in France.

As a reminder, this changes are expected to reduce our head count related expenses by approximately $4.9million annually. Non-GAAP operating income for the quarter was ½ of 1% down from the 5.8% we recorded in the prior quarter primarily due to the lower reported revenues.

Other income combined with interest income was approximately $ 977,000 for the quarter, up from $396, 000 that we recorded in the prior quarter. Our income tax provision for the quarter was $1.7 million and includes a $1.3 million noncash charge relating to the deferred tax asset established in the U.K. as well as $300, 000 of withholding tax expenses related to specific transaction in Turkey, Poland, and India.

As a reminder, last quarter we established the $10 million deferred tax asset on our balance sheet and we expect that our fiscal 2009 GAP bases tax position will be approximately $3 million higher than most tax provisions recorded for prior years. Our non-GAAP net income for the December quarter excluding amortization, stock based compensation, restructuring charges and the noncash income tax provision was $647,000 or $0.02 cents per diluted share compared to $1.7 million or $0.05 per diluted share in the prior quarter. Other debt, the net loss for the quarter ended December 31, 2008 was $2.7 million or $0.09 cents per diluted share.

Now let’s turn to cash flows in the balance sheet. At December 31, 2008 the aggregate cash, cash equivalent and restricted cash on our balance sheet was $53.9 million. A decline of $1.7 million sequentially. On accounts and currency basis assuming that exchange rate have not change from September 30, 2008, our cash balances at December 31st would have been $59 million, an increase of $3.4 million sequentially.

During the first quarter, cash flows from operation generated $2.6 million of cash due to strong cash collection. At the end of the quarter, our days sale outstanding or DSO relating to accounts receivable for 79 day down slightly from the end of the fourth quarter. The majority of our cash and equivalent are invested in institutional money market accounts and short term deposits for large financial institutions, to date we have not experienced any losses on this investment.

Now, let’s turn to an update on our outlook for fiscal year 2009. As a consequence of the continued challenging economic environment and the lack of clear visibility into the timing of an economic recovery and into the size and timing of new deal transaction, we are suspending guidance for fiscal year 2009 at this time. Once market conditions stabilize and predictability is more assured, we expect to once again provide forward looking guidance as has been the companies practice. What may provide some general parameters of our view of the remainder of fiscal year 2009. We expect to recognize approximately 9.5 million dollar in total license revenues in fiscal year 2009 associated with the contractual commitments under the Vodafone transaction that was closed in the first quarter of fiscal year 2008.

We expect to recognize several million dollars of the remaining $9.5 million in license revenue backlog exclusive of Vodafone over the next 3 quarters of fiscal year 2009. We expect to continue to close new business but the amounts and timing are difficult to predict. We also expect to continue to renew our existing support and maintenance contracts at rates in line with our historical experience.

For the trailing 12 month period ended December 31, 2008 support and maintenance revenues average approximately $9.9 million per quarter. We expect our average quarterly professional services revenues for fiscal year 2009 to approximate our total professional services revenue which was $6.4 million dollars for the first quarter of fiscal year 2009 and more importantly we expect to remain profitable on a non-GAAP basis for fiscal year 2008. We remain committed to managing our expenses and we continue to analyze and reduce operating costs in areas other than head count.

This projection consumed with the U.S. dollar does not materially strengthen or weaken from its current level and now I would like to turn the call back over to Steve for a few closing remarks, Steve?

Steve Springsteel

Thanks Pete. The market conditions remained challenging, we continue to close million dollar transactions. We continue to maintain high renewal ways of maintenance and support agreement and new opportunities continue to be added to our pipeline. This are unprecedented times but by no means are we simply hunkering down and trying to just wade out this economic situation rather we are going in the offensive even more aggressively than in the past.

We are focusing on our faster ROI products and competing aggressively on multiple fronts. We are offering more creative pricing model. We have adjusted our cost structure and continue to focus on profitability. We have proven our ability to morph the Company to address the current market demand and I believe we have the right products, people, partners, and strategy to ensure that Chordiant remains a leading best in class provider of customer experience solution.

Fiscal 2009 will be a challenge but we are taking that challenge head up and with that, we would now like to open the call for questions. Operator?

Question-and-Answer Session


Q&A portion

(Operator instruction) Our first question comes from line of Kevin Liu with - B. Riley. Please go ahead.

Kevin Liu - B. Riley

Thanks for taking my questions. I guess first question just on the deals that you mentioned might have been pushed out on the services side. I was wondering if you had tried to see some of the statements that worked for [43:15]. Are these implementations pushed out indefinitely?

Peter Norman

Well, yes. The one transaction that we talked about, they actually did re-scope their project and enter into a subsequent statement or work for future quarters

Kevin Liu - B. Riley

And in general, I think in your initial comments you have cited that there are some deals that resulted in delayed implementations. Were that related to this transaction or were there others in a similar situation?

Peter Norman

Now, that was the one that we talked about on the call.

Kevin Liu - B. Riley

Okay. And then in terms of the maintenance revenues, just backing out your licenses and special services so the quarter, it looked like it was a little below the historical average over the past 12 months. Is that purely on the foreign exchange side or are there customers that face some sort of difficulties or maybe being consolidated that have folded out to that maintenance line?

Peter Norman

On the maintenance line, yes, the reduction is almost exclusively foreign exchange.

Kevin Liu - B. Riley

Okay. At this point I mean is there any reason to worry about potential customers who are facing financial difficulties and any risk to your receivables or is it that maintenance revenue stream?

Steve Springsteel

Yes. This is Steve, Kevin. No, maintenance renewal is still pretty high. If you recall as we have talked previously the maintenance is high because our applications are very sticky and the high reduction that you saw in the maintenance revenue line was attributable to a foreign exchange reduction and that really will drill that but renewals are still in 90 plus range.

Kevin Liu - B. Riley

Okay. And then just last Steve, I was wondering given the level of bookings that you saw in the first quarter and I am assuming there was some impact from the write offs there but at the same time it looks like you would need to either cut back significantly on some of the OpEx items or you would need this in the bookings and substantially from the level you experienced here in Q1 in order to sustain the cash flow positive that you generated in Q1? Any comments related to that in terms of either what you are going to do on the expense side or perhaps if you do see enough in your pipeline where you feel like you will be cash flow positive for the year?

Steve Springsteel

Yes. The pipeline still looks pretty good. It is still in flux if I compare calendar Q4 which is our fiscal Q1 the market was very tumultuous, everybody was trying to figure out what their budgets were. So that causes a lot of disruption. If I look at where we are in this current quarter, calendar Q1, fiscal Q2 there are probably or there is still a fare amount of budget setting being done. The budgets that have been set, now they are trying to figure out, okay when do I have the ability to actually spend the money? So I would like to think that last quarter was a low water mark that we are going to be moving up from there.

Having said that, we are always looking at how we can increase sufficiency within the company and we will continue to do that.


Our next question comes from the line of Derrick Wood - Pacific Growth Equities. Please go ahead.

Derrick Wood - Pacific Growth Equities

Hey guys, how are you? I am just curious on going to market between 2 different products. I mean, are you guys even trying to sell the enterprise product at this point or is that not just even a possibility and you area focusing purely on the applications side?

Steve Springsteel

I tell you Derrick, we still have demand for the big foundation product primarily in the emerging geographies or emerging markets and in Europe, some of the European market in the US, it has slowed down to somewhat and again if I look at the pipeline, the pipeline it is really morphed more towards the lower ASP quicker ROI products like decisioning, like our marketing products, recommendation adviser, and those types of things.

Derrick Wood - Pacific Growth Equities

I know you guys had been training sales guys on how to go to market with database fully up to speed?

Steve Springsteel


Derrick Wood - Pacific Growth Equities

Okay, ands so anything you can characterize in terms of the health of that pipeline. Is the pipeline going up? Is it relatively stable right now or on the upside?

Steve Springsteel

Yes. Just to give you kind of some high level color without giving you too much of detail, if I go year-over-year the over all pipeline is slightly higher. If I double click into the over all pipeline decisioning products comprise a very large portion of the pipeline as contrasted to a year ago where it was more heavily dominated by the foundation or enterprise product. But really it has come up in a lot of decisioning pipeline is moving through the various stages much faster than the foundation type of transactions are.

Derrick Wood - Pacific Growth Equities

And is that mostly in the installed base or you are seeing some new customer interests as well?

Steve Springsteel

Well, we are seeing new customer base but the path of least resistance is in the installed base because our installed base, interesting enough, was mostly foundation. So you can go into the installed base and then you can sell the decisioning on top of the foundation. The other thing that we spoke about in the prepared comments was where we are going to other CRM installed customers like a CIBO customer and putting decision in top of CIBO or on top of their existing applications albeit for Apps space, for collections, for CRM that type of thing.

We can co-exist with those other applications.

Derrick Wood - Pacific Growth Equities

Yes. Now you did say that the emerging markets were pretty stalled right now so you so you do not expect the whole lot of opportunities happening there. I mean the macro conditions are petty bad right now.

Steve Springsteel

Yes. We closed a little transaction in China. We expect to get a little bit more in China but the big growth in China I think is going to be pushed out some and then we saw lot of activity in Russia and I think that has slowed down installed somewhat as they try to figure their economic situation out as well.

But you know, you go on other countries like Turkey, the Eastern Blocs and Turkey, Turkey is doing well. There is a lot of activity going on there so there are definitely still opportunities out there.

Derrick Wood - Pacific Growth Equities

Okay. In terms of the slow down and demand for services, is Citi one of those customers.

Steve Springsteel

Yes. Citi was one of those customers but we have already factored that in previously and given the tumultuous things that are going out within Citi and unless they have worked through their issues, and they will come to those issues, I have no doubt about that. They just went live in another division with our product most recently here. So, those implementations are going fine but in the fourth calendar quarter, our first fiscal quarter, we saw a bit of a slowdown on services and again, is the market was going to blowing out and people are trying to figure out what is going on or what they should be doing.

Derrick Wood - Pacific Growth Equities

So, what is the current outlook with Citi?

Peter Norman

We are still going to continue to provide the services. What we baked into our forecast or we put together our model does not change, as what we have said previously which we really dramatically reduced any license potential from Citi considering that would be upside whatever happens there and that we scaled back our services piece dramatically and that was done by the quarter ago, two quarters ago.

Derrick Wood - Pacific Growth Equities

Okay. And I guess on that note, I guess extrapolating some of the information you have got in terms of revenue item guidance for 2009. I mean it would look like a base case scenario would be 60 million plus on the services side and maybe 20 million on the license plus potential additional deal as well?

Peter Norman

Yes, I mean the way we added it up if you come up with a base of about total.

Derrick Wood - Pacific Growth Equities

In total. Okay.

Peter Norman

Taking the key one actual.

Derrick Wood - Pacific Growth Equities

Got you. I guess my last question. So you have done on restructuring, can you just going to give us an update on what that the sales force looks like geographically now?

Peter Norman

Yes. We did change t the composition of the sales force and it was more skewed on the international side and in domestic side and that really just marries up with the opportunities, the sales opportunities whether falling geographically.

As I have mentioned we had began to train our sales force on our decisioning and collection products and so forth at the beginning of last years or have been a year now. So, they are fully ramped and productive on the decisioning side.

Going back to the foundation side, again I still think there are some opportunities there and I would be surprised if we still see some transactions closed on that side as well.

Steve Springsteel

I would expect the numbers of quota carrying folks that are relatively unchanged quarter over quarter. That is 26 versus 27 last quarter.


(Operators Instructions). At this time, there are no further questions in queue. I would like to turn the call back over to management. You may continue.

Steve Springsteel

Great. Thank you very much everybody for attending this afternoon. I look forward to talking you again of the current quarter. Thank you.


Ladies and gentlemen, this now concludes the Chordiant Software first quarter 2009 earnings conference call. If you would like to listen to a replay of today’s conference please 303-590-3000 or 800-405-2236 with the access code of 1112480#. Thank you for your participation and you may now disconnect.

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